Balancing the Risks, Benefits, and Costs of Homeland Security

Mueller, John, Stewart, Mark G., Homeland Security Affairs

Introduction

In seeking to evaluate the effectiveness of the massive increases in homeland security expenditures since the terrorist attacks on the United States of September 11, 2001, the common and urgent query has been "are we safer?" This, however, is the wrong question. Of course we are "safer"-- the posting of a single security guard at one building's entrance enhances safety, however microscopically. The correct question is "are the gains in security worth the funds expended?" Or as this absolutely central question was posed shortly after 9/11 by risk analyst Howard Kunreuther, "How much should we be willing to pay for a small reduction in probabilities that are already extremely low?"1

Tallying the Costs ? One Trillion Dollars and Counting

We have, in fact, paid ? or been willing to pay ? a lot. In the years immediately following the terrorist attacks of September 11, 2001 on Washington and New York, it was understandable that there was a tendency to fashion policy and to expend funds in haste and confusion, and maybe even hysteria, on homeland security. After all, intelligence was estimating at the time that there were as many as 5,000 al Qaeda operatives at large in the country,2 and as New York Mayor Rudy Giuliani reflected later, "Anybody, any one of these security experts, including myself, would have told you on September 11, 2001, we're looking at dozens and dozens and multi-years of attacks like this."3

The intelligence claims and the anxieties of Giuliani and other "security experts" have clearly proved, putting it mildly, to be unjustified. In the frantic interim, however, the United States government increased its expenditures for dealing with terrorism massively. As we approach the tenth anniversary of 9/11, federal expenditures on domestic homeland security have increased by some $360 billion over those in place in 2001. Moreover, federal national intelligence expenditures aimed at defeating terrorists at home and abroad have gone up by $110 billion, while state, local, and private sector expenditures have increased by two hundred billion more. And the vast majority of this increase, of course, has been driven by much heightened fears of terrorism, not by growing concerns about other hazards ? as Veronique de Rugy has noted, by 2008 federal spending on counterterrorism had increased enormously while protection for such comparable risks as fraud and violent crime had not, to the point where homeland security expenditures had outpaced spending on all crime by $15 billion.4

Tallying all these expenditures and adding in opportunity costs ? but leaving out the costs of the terrorism-related (or terrorism-determined) wars in Iraq and Afghanistan and quite a few other items that might be included ? the increase in expenditures on domestic homeland security over the decade exceeds one trillion dollars. The details are in Table 1. This has not been enough to move the country into bankruptcy, Osama bin Laden's stated goal after 9/11, but it clearly adds up to real money, even by Washington standards.5 Other countries like Britain, Canada, and Australia have also dramatically increased their expenditures.

[Figure omitted. See PDF.]

Relevant spending elements not included in the table

* Terror-related wars in Iraq and Afghanistan

* Costs of crime facilitated by focus of police and FBI on, or preoccupation with, terrorism

* Costs resulting from hurricane Katrina that might have been mitigated if DHS had not been so preoccupied by terrorism

* Additional Post Office expenditures to deal with the effects of 9/11 and the anthrax letters

* Effects on tourism, property and stock market values, business location decisions, etc. though dead weight losses might capture some of these

* In addition to the short-haul fatality effect included in the table, the increase in traffic fatalities in the U. …

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